Recent Development
The Central Bank of the Republic of Turkey ("CBRT") published the Communiqué No. 2020/16 on the Maximum Interest Rates for Credit Card Transactions ("Communiqué") changing the monthly maximum interest rates to be applied to credit card transactions. The Communiqué entered into force upon its publication in the Official Gazette No. 31290 dated October 31, 2020 and replaced the previous Communiqué No. 2016/8.
What Does the Communiqué Say?
• The Calculation of Maximum Interest Rates: According to the Communiqué, the CBRT will use the following calculation methods in order to determine the monthly maximum interest rates:
- The calculation of interest rates for credit card transactions in TRY: The maximum contractual interest rate for credit card transactions in TRY will be calculated by adding 55 basis points to the monthly reference rate which is (i) calculated over the weighted average flow interest rate applied by banks to all types of TRY deposits with maturities of 32-45 days; (ii) updated if there is 5% positive or negative change in the previously announced reference rate; and (iii) published by the CBRT on the last fifth business day of each month.
- The calculation of interest rates for credit card transactions in foreign currencies: The maximum contractual interest rate for credit card transactions in a foreign currency will be calculated as 80% of the contractual interest rate determined for TRY transactions, by rounding the decimal to two digits.
The maximum default interest rate will be calculated by adding 30 basis points to the maximum contractual interest rate for credit card transactions in a foreign currency.
According to the Communiqué, the CBRT will publish the maximum monthly contractual and default interest rates for credit card transactions on its website on the last fifth business day of each month, which will become applicable starting from the first day of the following month.
• Transitional Period: The new interest rates calculated according to the Communiqué will come into force as of November 1, 2020. Until this date, the existing communiqué's provisions will be applicable.
• New Monthly Interest Rates Applicable for November: The CBRT announced the monthly maximum interest rates that will be applied starting from November 1, 2020:
- for TRY transactions, the maximum contractual interest rate is now set to 1.46%, while the maximum default interest rate is set to 1.76%; and
- for foreign currency transactions, the maximum contractual interest rate is now set to 1.17%, while the maximum default interest rate is set to 1.47%.
Conclusion
With the new Communiqué, the CBRT clarified the calculation of the maximum interest rates for credit card transactions.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.